Published October 25, 2002 in the Midland (MI) Daily News

By Beth Medley Bellor

Tough economic conditions have led The Dow Chemical Co. to announce a number of actions for 2003, including a salary freeze.

“The lack of market momentum in September highlighted the challenges Dow faces for the rest of this year and into 2003,” said J. Pedro Reinhard, executive vice president and chief financial officer, in announcing third quarter earnings Thursday. “Therefore, Dow’s corporate operating board is announcing significant steps to improve Dow’s earnings and cash flow.”

The company plans to use these measures to improve cash flow by more than $1 billion.

According to the Global Newsline sent to employees Thursday, the plan has six major elements:

• •Reduce capital spending by 20 percent from 2002. Priority will be given to maintaining assets to keep them operating safely and reliably.
• •Reduce prime controllable costs by $350 million, re-examining plans and budgets on a business-by-business and function-by-function basis.
• •Cut hiring plans in half. The priority will be on maintaining good university relations.
• •Intensify efforts to optimize the supply chain. The goal will be to make improvements that will free up about $500 million in cash through inventory reduction, reduced logistics costs, and savings in raw material purchases.
• •Delay or cancel some corporate activities to allow employees to focus on immediate priorities. For example, some internal training will be delayed to save money for travel and materials.
• •Eliminate the salary increase program.

“We don’’t have a clear understanding at this point of how we will be impacted locally,” said Holly LaRose-Roenicke, Michigan Operations spokeswoman. Plans for implementation of the board’’s directives are being discussed.

The salary freeze is fairly simple, though.

“Typically, in the spring there is a process where employees are given a salary increase and that’’s not going to happen,” LaRose-Roenicke said.

Dow employees also are eligible for bonuses through a performance award program as individuals or teams meet certain goals. Details on that program still are being finalized, LaRose-Roenicke said, and she did not know whether it would be affected.

The corporate operating board has 16 members, including Reinhard and Mike Parker, president and chief executive officer.

Dow shares fell 9 percent Thursday, to $24.97.